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The Joint Dynamics of Spot and Forward Exchange Rates

Author

Listed:
  • Francisco de Castro
  • Alfonso Novales

Abstract

One and three-month forward exchange rates for the deustche mark, french franc, sterling pound, yen and peseta, relative to the US dollar, seem to be cointegrated with future spot rates, but not with current exchange rates. We confirm the unbiasedness hypothesis for this data set, as a robust cointegrating relation between forward and future spot rates, although forward rates are poor predictors of future exchange rates.

Suggested Citation

  • Francisco de Castro & Alfonso Novales, 1997. "The Joint Dynamics of Spot and Forward Exchange Rates," Working Papers 9715, Banco de España.
    • Handle: RePEc:bde:wpaper:9715
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    More about this item

    Keywords

    EXCHANGE RATE ; COINTEGRATION;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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